Canada: Supreme Court Decision Today In Important Securities Class Action Trilogy

Last Updated: December 7 2015
Article by David Di Paolo, Heather Pessione and Graham Splawski

Most Read Contributor in Canada, February 2017

​A divided Court held that plaintiffs must be granted leave to bring an action for secondary market misrepresentation under the Ontario Securities Act within three years of the alleged misrepresentation, regardless of whether a class proceeding has been commenced.

In CIBC v. Green, 2015 SCC 60, a much-anticipated decision, the Supreme Court of Canada held this morning that leave of the court to commence an action for secondary market misrepresentation under the Ontario Securities Act1 must be obtained within the prescribed three-year limitation period, and that the limitation period for obtaining leave is not tolled in circumstances where a class proceeding has been commenced. However, the court has the jurisdiction to grant "backdated" leave — an order nunc pro tunc — where the plaintiff is granted leave after the expiry of the limitation period but filed the leave motion prior to the expiry of the limitation period. The decision by a heavily divided Court came in a trilogy of cases – Green v. CIBC, Silver v. IMAX, and Celestica v. Millwright Regional Council of Ontario Pension Trust Fund — reported as CIBC v. Green ("CIBC").2 Our discussion of the background and context of these cases is available here.

The Court largely upheld in result the decision of a unanimous panel of five judges of the Ontario Court of Appeal. However, the majority in the Supreme Court disagreed with the Court of Appeal's conceptual framework, and with the Court of Appeal's conclusion that the limitation period for obtaining leave to commence an action for secondary market misrepresentation could be tolled by commencing a proposed class proceeding.

At issue was whether section 28 of the Ontario Class Proceedings Act,3 which tolls a limitation period once a cause of action is "asserted", applies once leave is sought to commence an action for secondary market misrepresentation under the Securities Act, or only once such leave is granted by the court.

A bare majority of Justices McLachlin, Rothstein, Côté and Cromwell held that merely pleading an intention to seek leave under the Securities Act in a proposed class proceeding does not amount to "asserting" a claim for the purposes of section 28 of the Class Proceedings Act. Rather, a cause of action for secondary market misrepresentation is only "asserted" once a representative plaintiff obtains leave of the court to commence the action.

However, the majority held that the Court has the jurisdiction under rule 59.01 of the Ontario Rules of Civil Procedure4 to grant leave nunc pro tunc — i.e., to "backdate" its order granting leave to bring an action for secondary market misrepresentation — where the Court makes the order after the limitation period expires. The Court should only exercise this discretion where the representative plaintiff seeks leave under the Securities Act before the three-year limitation period prescribed in the Act expires. The majority agreed that nunc pro tunc orders should be granted sparingly, but due to factual disagreements the Court did not provide more guidance than that. The majority also agreed that the doctrine of special circumstances does not apply to provide the court with discretion to extend the limitation period in respect of secondary market disclosure.

The Court unanimously upheld the Court of Appeal's decision that the threshold for leave to bring an action for secondary market misrepresentation under the Securities Act is whether the plaintiff has a reasonable or realistic chance that the action will succeed.

Due to the divisions in the Court, and the discretionary approach taken by the majority to whether to allow statute-barred claims to proceed, this decision provides significantly less certainty than the Court of Appeal's previous decisions on this issue. The take-away for litigants is that while defendants will have greater opportunities to oppose leave motions on the basis of the expiry of the applicable limitation period, proposed representative plaintiffs are likely to move more expeditiously to seek leave, putting increased pressure on defendants who intend to contest such motions. Further, by endorsing the discretionary solution of a nunc pro tunc leave order, the Court has ensured that even where a claim may be statute-barred, plaintiffs will nonetheless likely seek leave to bring the claim. It remains to be seen whether the Legislature will respond with amendments to either the Securities Act or the Class Proceedings Act.

Full text of the decision can be found here.


1 Securities Act, R.S.O. 1990, c. S-5.

2 Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60.

3 Class Proceedings Act, 1992, S.O. 1992, c. 6.

4 Rules of Civil Procedure, O.Reg 194.

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